[Updated with comment from the Bank of Korea]

South Korea’s inflation in November gained 3.7 percent from a year ago in the fastest rise in nearly a decade on across-the-board price strengthening from food and fuel to living and dining cost.

According to Statistics Korea on Thursday, the country’s consumer price index (CPI) rose 3.7 percent on year to 109.41 in November, marking the strongest gain since 4.2 percent in December 2011.

Korea’s inflation accelerated to 3.2 percent in October after hovering above the Bank of Korea’s mid to long-term target of 2.0 percent from April in line with strengthening in fuel and food prices due to global supply shortages.

Finance Minister Hong Nam-ki tried to appease the concerns by projecting prices to ease from December and stressing Korea’s inflation gain was relatively moderate versus other major economies.

He projected the annual inflation rate would fall within the estimates of 2.3 percent by the Bank of Korea and 2.4 percent by the Organization for Economic Cooperation and Development.

The Bank of Korea (BOK) however later in the day projected annual inflation could hit above 2.3 percent that had been revised up last week as the November price level came higher than expected.

The inflation for this year would be the highest since 4.0 percent in 2011 even when it averages at 2.3 percent.

“We expect consumer prices to remain above the target range for some time even on easing in international prices due to demand-side pressure and supply bottleneck,” it said in a statement.

The bank will “keep close watch” on the ramifications on domestic prices from deepening and drawn-out supply bottleneck.

The BOK governor Lee Ju-yeol after November monetary policy meeting that implemented the second hike of the year to push the base rate to 1.0 percent implied another rate increase as early as in the next meeting in January if inflation poses ongoing concern.

Prices of industrial goods soared 5.5 percent in November year over year, the strongest since 6.4 percent in November 2011, due to jump in imported raw material prices.

Prices of oil jumped 35.5 percent, the highest since July 2008. Prices of gasoline jumped 33.4 percent, diesel 39.7 percent, and LPG 38.1 percent.

The government slashed fuel taxes by a record 20 percent from November 12 to tackle inflation from surging oil and commodity prices. The cut, however, had limited impact on bringing down overall consumer prices in November.

Utility prices also rose from higher fuel cost. Electricity, water, and gas prices added 2 percent, 0.9 percent, and 0.1 percent, respectively, data showed.

Prices of agricultural, livestock and fishery products rose 7.6 percent from a year ago in November.

Prices of agricultural products were up 5.7 percent year over year in November, with vegetable prices in particular soaring 9.3 percent. Prices of pork soared 14 percent, Korean beef 9.2 percent, import beef 24.6 percent, eggs 32.7 percent, and cucumber 99 percent.

Prices of livestock products gained 15 percent and fisheries 0.2 percent.

Prices of services rose 2.2 percent on year. Prices of public service rose 0.6 percent while individual service 3 percent.

The cost of jeonse, or long-term lease, soared 2.7 percent, the sharpest since 2.6 percent in November 2017, and monthly rent 1 percent.

Dining cost increased 3.9 percent year over year.

Living necessaries price index soared 5.2 percent from a year ago, the sharpest since 5.2 percent in August 2011.

Given the trend of international prices of fuel, grains, and commodity on which Korea relies heavily, inflation rate in December also won’t be able come down from the strong levels, said Eo Woon-sun, an official at Statistics Korea.

By Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]